[Code of Federal Regulations] [Title 7, Volume 12] [Revised as of January 1, 2005] From the U.S. Government Printing Office via GPO Access [CITE: 7CFR1902.4] [Page 61-62] TITLE 7--AGRICULTURE CHAPTER XVIII--RURAL HOUSING SERVICE, RURAL BUSINESS-COOPERATIVE SERVICE, RURAL UTILITIES SERVICE, AND FARM SERVICE AGENCY, DEPARTMENT OF AGRICULTURE (CONTINUED) PART 1902_SUPERVISED BANK ACCOUNTS--Table of Contents Subpart A_Disbursement of Loan, Grant, and Other Funds Sec. 1902.4 Establishing MFH reserve accounts in a supervised bank account. (a) General requirements. All MFH borrowers required to maintain reserve accounts must place the reserve accounts in a supervised bank account(s) which meets the following requirements: (1) Countersignature requirements. The reserve account must require that any funds withdrawn be countersigned by an authorized FmHA or its successor agency under Public Law 103-354 official. (2) Restrictions on collateral. The financial institution holding the reserve account must ensure that the funds are not pledged or taken as security without the Agency's prior consent. (3) Interest bearing. The reserve account funds are encouraged to be maintained in an interest-bearing account. The ``Interest-Bearing Deposit Agreement'' set out in exhibit B of this subpart is not required to be used for reserve accounts. (4) Restricted investments. Reserve funds must be placed in investments authorized in subpart C of part 1930 of this chapter. The authorized investments are deemed to be of acceptable risk such that the potential for any loss is minimal. (5) Financial institutions. The reserve account must be maintained in authorized financial institutions set out in subpart C of part 1930 of this chapter (e.g., banks, savings and loan institutions, credit unions, brokerage firms, mutual funds, etc.). Generally, any financial institution may be used provided invested or deposited funds are insured to protect against theft and dishonesty. The reserve account funds need not be Federally insured. However, if Federally insured, any amount held above the Federal insurance ceilings established must be backed by a pledge of collateral from the financial institution, or otherwise covered by non-federal insurance against theft and dishonesty. (6) Rules where multiple projects are involved. A reserve account(s) must be maintained for each borrower. When a borrower owns multiple projects, reserve accounts may be established for each project. A single reserve account may also be established by a borrower owning multiple projects, provided the conditions set out in subpart C of part 1930 of this chapter are met. (7) Term. Reserve accounts are expected to be kept for the full term of the loan. (b) Deposits and account activity statements--(1) Deposits. Generally, the [[Page 62]] FmHA or its successor agency under Public Law 103-354 will not require the review or approval of deposits or the use of Forms FmHA or its successor agency under Public Law 103-354 402-1 or FmHA or its successor agency under Public Law 103-354 402-2. (2) Account activity statements. Generally, the FmHA or its successor agency under Public Law 103-354 will not monitor or reconcile the reserve account activity statements issued periodically by the financial institutions holding the funds. FmHA or its successor agency under Public Law 103-354 will monitor reserve account levels through budget reports, audits, and Agency reserve tracking systems. If disputes arise or the borrower is in violation of Agency regulations, the Agency may require account activity statements. When account activity statements are sought, it will normally be sufficient to obtain the statement which reflects balances as of the last activity statement ending period. Form FmHA or its successor agency under Public Law 103- 354 402-2 is not required to be used. [59 FR 3778, Jan. 27, 1994] Effective Date Note: At 69 FR 69104, Nov. 26, 2004, Sec. 1902.4 was amended in paragraph (a)(4) by revising the words ``subpart C of part 1930 of this chapter'' to read ``7 CFR part 3560, subpart G,'' in paragraph (a)(5) by revising the words ``subpart C of part 1930 of this chapter'' to read ``7 CFR part 3560, subpart G,'' and in paragraph (a)(6) by revising the words ``subpart C of part 1930 of this chapter'' to read ``7 CFR part 3560, subpart G,'' effective February 24, 2005.